Reverse Charge Mechanism

[Aditya Vinay Ram]

Hi Sir/Madam,

With regard to RCM applicability, is Service provider (or) receiver liable to register to discharge the liability created u/s 68(2) of Finance Act, 1994 even if the taxable turnover does not cross 9L during the previous year ?, If yes, please give the legal reference (or) Notification details.

Thank you,

Aditya Vinay Ram

[PAWAN KUMAR]

Dear Sir,

In case of reverse charge mechanism, service receiver is required to register with the department to discharge his liability. The exemption of rupees ten lakh is not applicable for service receiver.

As far as the service provider is concern, service provider can claim exemption of service tax as per notification No.33/2012-ST dated 20.06.2012. No need to register until the taxable turnover reaches rupees nine lakhs.

[Mahendra L]

hi

As per the Provisions of ST there is no Threshold limit to SR who pays the ST under RCM.

the Provisions are as follows as per the provisions of ST

1.No threshold exemption of ₹ 10 lacs is available to Service Receiver (SR) as this exemption is available to Service Providers only. (refer NN 33/2012-St dt. 20-06-2012)

2. Service Receiver is liable to pay service tax under this mechanism from very first invoice received under this category. It means SR is liable to pay ST even when SP is within the ambit exemption limit under NN 33/2012-ST. 

AI Summary

Reverse charge mechanism: service receivers must register and pay tax from the first invoice while providers may use notification exemption. Reverse charge requires the service receiver to register and discharge tax liability from the first invoice for services covered by the mechanism; the turnover-based threshold exemption available to service providers does not apply to receivers. Service providers, by contrast, may claim the notification-based exemption delaying their own registration and tax liability until they satisfy the provider turnover threshold.